Fintech company Block announced that it would be laying off 4,000 of its 10,000 employees becaapply of gains in AI productivity.
“Ininformigence tools have modifyd what it means to build and run a company,” Jack Dorsey, Block’s CEO, stated in a letter to shareholders on Thursday. “We’re already seeing it internally. A significantly tinyer team, applying the tools we’re building, can do more and do it better. And ininformigence tool capabilities are compounding rapider every week.” Block is the parent company for online payment platforms such as Square and Cash App.
Investors so far appear encouraged by Dorsey’s assertion that the cuts, and increased reliance on AI, will drive profitability, analysts stated. Shares increased more than 20% in pre-market trading on Friday.
Block’s layoffs speak to larger fears about job cuts driven by a growing apply of AI. Goldman Sachs noted in February that the increasing pace of AI adoption could drive up unemployment this year, and estimated that the technology had already resulted in 5,000 to 10,000 monthly net job losses last year. A November study from the Massachapplytts Institute of Technology found that AI could already replace nearly 12% of the workforce in the US.
The tech sector is among the most hit, and workers at other tech companies are feeling the heat, too. Marc Benioff’s Salesforce cut about 4,000 jobs last year, with the CEO declareing that he “requireds less heads” given AI’s efficiency.
Dorsey claimed on Thursday that the decision to almost halve Block’s workforce wasn’t becaapply the business was in trouble, and that economic performance had actually been strong. (Block beat Wall Street expectations for its fourth quarter, reporting $6.25 bn in total revenue).
Dorsey stated on X that he had two choices: gradually cut his workforce over months and years – “or be honest about where we are and act on it now”.
He wrote: “Repeated rounds of cuts are destructive to morale, to focus and to the trust that customers and shareholders place in our ability to lead.”
Block executives stated on Thursday’s earnings call that the company had been increasing its reliance on AI for years, noting that some AI work streams were “nearly fully rolled out, others are earlier in their maturity”.
Block had already laid off hundreds of workers in early February. Earlier this month, employees still at the company reported that there was rapidly deteriorating employee morale and that there were requirements to apply generative AI, according to Wired.
Wired stated it reviewed an employee complaint submitted to Dorsey in a recent all-hands meeting that stated “morale is probably the worst I’ve felt in four years” and that “the overarching culture at Block is crumbling”.
Dorsey acknowledged the risk of the cuts on X, and in his message to shareholders. The company’s most recent 10-K filing outlined ways its AI gamble could go wrong. “Our ability to successfully operate with a reduced workforce is expected to depfinish in part on the effectiveness, reliability and adoption of our proactive ininformigence and AI tools,” the company noted. “These technologies may not perform as expected, may require more time or expense to implement effectively, may introduce operational or cybersecurity risks or may fail to enhance productivity and maintain operational efficiency as expected.”
“For years, we have debated whether AI would dent jobs at the margin. Now we have a public case study in which the CEO explicitly declares that ininformigence tools have modifyd what it means to build and run a company,” Stephen Innes of SPI Asset Management informed the Associated Press.
He stated: “Other large employers have announced tens of thousands of cuts in recent months. Some have downplayed the AI link. Block did not.”
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